Monday, June 04, 2018

Air India stake sale: Govt 24% stake may have put investors off

New Delhi: The Centre’s decision to retain a significant minority stake in debt-laden Air India after its privatisation is seen as the primary reason behind the muted response to the proposed disinvestment in the national carrier.

“The government decision to retain 24% post-divestment was a non-starter,” said an aviation industry veteran, aware of the discussions around the sale of government equity in the loss-making airline. A government official close to the bidding process also told ET that there was no point in keeping a residual stake.

“It (the government) should have gone ahead with the initial proposal, which was also recommended by Niti Aayog, to fully divest the government holding in the firm (Air India),” the official said on the condition of anonymity.

Niti Aayog, the government’s policy think tank, had recommended that the government completely exit Air India. However, the alternate mechanism, a panel of ministers set up to supervise the carrier’s sale, ruled in favour of initially retaining a 24% in the airline and exiting completely at a later stage —may be after three years.

Another industry insider said the government’s residual stake, even as a minority shareholder, did not draw buyers to the carrier. “The government holding even a 1% stake is not a comfortable situation for any investor buying an airline,” he said.

New Delhi did not receive any interest for its proposal to sell a 76% stake in Air India by Thursday — the last day for submitting interests. On Friday, the Prime Minister’s Office was briefed on the issue and the government has already started redrawing the proposal. The asset monetisation of the carrier will go on as usual despite the bidding process not going as expected, a senior official said. The government had also considered other possibilities, such as management lease and retail listing: both were seen as unfeasible for Air India, he said.
The Tata Group, IndiGo, Jet AirwaysNSE -1.86 % and Spice Jet were among the airlines that held discussions with the government on Air India. The official told ET that the Tata Group and Jet highlighted the stressed operations at its airline entities, while IndiGoNSE -0.06 % had not agreed to specific conditions. The alternate mechanism, headed by the finance minister, is expected to consider a revised proposal on the carrier’s sale next week. The official said if jet fuel had been bought under the ambit of the goods and services tax (GST), it would have led to greater bidding interest.

He said the government’s condition that it should be run only by Indian investors was, probably, a bit rigid. Arevised proposal on the sale will again be sent to the alternate mechanism through the committee of secretaries, headed by the cabinet secretary, for approval.
04/06/18 Mihir Mishra,Dheeraj Tiwari, Vasudha Venugopal/Economic Times
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